HUL creates 15 teams with separate sales and innovation targets

The new structure is in sharp contrast with the company’s earlier model of having central marketing, brand and sales function team across categories.Sagar Malviya | ET Bureau | May 19, 2017, 08:20 IST

Sanjiv MehtaHindustan Unilever has carved out 15 teams within the organisation for each category with separate targets in sales and innovations in an effort to be more agile as it looks to fight nimbler rivals and mop up higher sales in a fast changing consumer environment. Each team called Country Category Business Teams or CCBTs have representatives from all functions including R&D, sales and marketing, supply chain and finance and run as independent groups with an entrepreneurial mindset, something that HUL attributes as one of the key reason for bucking the slowdown trend last quarter.

The new structure is in sharp contrast with the company’s earlier model of having central marketing, brand and sales function team across categories.

“These are lead by CCBT heads; most of them would be in early 30s and are fully empowered to deliver the plan for the year. This has unleashed huge amount of trapped capacity. Our job is to mentor and coach them,” HUL’s managing director Sanjiv Mehta told ET a day after it posted an 8% rise in net sales with 4% volume growth, ahead of peers, including Colgate, Dabur and Marico. “The functional representatives in the CCBT represent the function and in turn dovetail CCBT agenda with the functional agenda.”

About two years ago, the maker of Dove shampoo and Lux soap divided the country into 14 clusters - Winning in Many Indias - and added a fifth branch in central India to accelerate sales in a relatively underpenetrated but high-growth market.

The company claimed its strategy of countering regional competition helped improve market share for about 90% of its products. Just last year, HUL pruned its reporting layers to make divisional heads report directly to their respective global function heads at Unilever’s London headquarters as part of the parent’s global strategy to drive quick decision making and cut rollout time of its innovations across markets.

HUL’s latest move comes at a time when the government is finalising the nuts and bolts of the new tax framework under GST, proposed to be rolled out from July. And most companies including HUL expect some de-stocking of products in the trade due to GST, albeit temporarily.

“We are as strong as our weakest link in GST. But this is a massive change and whenever you do the change, whatever is your extent of preparation, there would be imponderables. The suppliers are much more ready compared to the trade, especially wholesale driven which will really have to up the game,” added Mehta.

With parent Unilever recently announcing its target of expanding operating margins from 16.4% in CY16 to 20% in CY20, implying a 360 bps expansion, analysts expect HUL to also plan for an accelerated margin expansion. India accounts for roughly 8% of Unilever's sales and is the biggest among emerging markets for them.

“HUL’s new Assam factory has a ten-year excise duty exemption and has now started production, we estimate that this can give them 70-80 bp of savings, assuming 8-10% production shifts there,” wrote Arnab Mitra and Rohit Kadam of Credit Suisse in an investor note adding that FY18 margins can expand by over 100 bps through potential cost savings in logistics which can accrue along with some benefit of lower rates and input tax credits under GST.

With Patanjali's rise to a Rs 10,000 crore company in less than a decade, several MNCs have shifted focus to the ayurveda sector. HUL, that launched Lever Ayush last year, is also bringing a new brand Citra, an organic skin care brand from Indonesia and has also rolled out naturals variants under brands like Tresemme and Fair & Lovely.

“We sensed that ‘natural’ will become a big play nearly 15 years back but it was a bit ahead of time. Natural as a phenomena is not just restricted to India but we are seeing this in different parts of the world and are manifested in different ways such as chemical free, organic, herbal, khadi or ayurveda.” said Mehta adding that the company has had an incremental growth of Rs 12,000 crore in the past five years, bigger than the overall turnover of most rivals in the country.

RURAL FOCUS

HUL gets more than a third of its sales from rural markets, which were growing twice as fast than urban areas. But since tha last two years, the pace of growth in the hinterlands slowed down. HUL, however, feels it will pick up soon.